Oil hovers below $70 in Europe after 9-day drop

December 15, 2009 - 6:50am

By BARRY HATTON
Associated Press Writer

(AP) - Oil prices hovered below $70 a barrel on Tuesday, held down by high inventories and weak demand while investors awaited new data about the U.S. economy.

By early afternoon in Europe, benchmark crude for January delivery was up 10 cents at $69.61 in electronic trading on the New York Mercantile Exchange. On Monday, the contract fell 36 cents to settle at $69.51.

Prices have dropped over the previous nine days _ the longest slide since 2001 _ on investor doubts about a recovery in U.S. crude demand and as the dollar strengthened.

Crude is down about 13 percent since reaching its 2009 high of $82 a barrel in October.

Analysts at Petromatrix Research said Tuesday that "the negative momentum is not over."

And Galena Illinois-based Ritterbusch and Associates said in a report said a further slide to the $65 to $66 area is "looking increasingly likely."

Later Tuesday, the U.S. is due to publish its weekly oil inventory report. Other economic data, including November industrial output figures, are also expected to offer some clues about the health of the world's largest economy.

While some encouraging signs for the U.S. economy have appeared lately, the Federal Reserve forecasts unemployment will remain high because companies won't start rehiring until they are confident the recovery will last.

Investors are also watching closely the U.S. dollar, which has reversed a yearlong slide this month. Traders had been buying crude and other commodities as a hedge against inflation and a weaker currency.

The euro fell to $1.4556 on Tuesday from $1.4656 on Monday while the dollar rose to 89.24 yen from 88.55. The British pound fell to $1.6261 from $1.6304.

In other Nymex trading in January contracts, heating oil was down 0.11 cent at $1.9071 while gasoline was up 0.48 at $1.8315. Natural gas rose 7.3 cents to $5.405 per 1,000 cubic feet.

In London, Brent crude for January delivery lost 5 cents to $71.84 on the ICE Futures exchange.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.